nep-law New Economics Papers
on Law and Economics
Issue of 2019‒04‒29
nine papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Risk-Mitigating Technologies: the Case of Radiation Diagnostic Devices By Galasso, Alberto; Luo, Hong
  2. Divorced in a Flash: The Effect of the Administrative Divorce Option on Marital Stability in the Netherlands By Jan Kabátek
  3. Addressing Seasonality in Veil of Darkness Tests for Discrimination: An Instrumental Variables Approach By Jesse Kalinowski; Matthew B. Ross; Stephen L. Ross
  4. Product patents and access to innovative medicines in a post-trips-era By Watal, Jayashree; Dai, Rong
  5. St. Thomas Aquinas and the Development of Natural Law in Economic Thought By Rashid, Muhammad Mustafa
  6. Taking the Rule of Law Seriously – How the EU Could Foster Its Own Values By Voigt, Stefan
  7. Optimal Destabilization of Cartels By Ludwig von Auer; Tu Anh Pham
  8. Learning cooperation from the commons By Berge, Erling
  9. Has the Swedish Business Sector Become More Entrepreneurial than the US Business Sector? By Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars

  1. By: Galasso, Alberto; Luo, Hong
    Abstract: We study the impact of consumers' risk perception on firm innovation. Our analysis exploits a major surge in the perceived risk of radiation diagnostic devices, following extensive media coverage of a set of over-radiation accidents involving CT scanners in late 2009. Difference-in-differences regressions using data on patents and FDA product clearances show that the increased perception of radiation risk spurred the development of new technologies that mitigated such risk and led to a greater number of new products. We provide qualitative evidence and describe patterns of equipment usage and upgrade that are consistent with this mechanism. Our analysis suggests that changes in risk perception can be an important driver of innovation and shape the direction of technological progress.
    Keywords: Innovation; medical devices; product liabilities; risk perception
    JEL: K13 O31 O32 O34
    Date: 2019–04
  2. By: Jan Kabátek (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne)
    Abstract: Administrative divorce is an optional divorce procedure which allows couples to bypass the court system and dissolve their marriages in a streamlined, uncontested process. The lack of court involvement renders the administrative divorce faster and less expensive than the conventional divorce. In this paper, I investigate whether the administrative divorce option affected the stability of marriages in the Netherlands. Leveraging the ban of the procedure in 2009, I show that the divorce risks were 11.6% higher under the legal regime which allowed for administrative divorce. This effect is causal, and it exhibits considerable heterogeneity, being stronger among dual-earner couples, native couples, and couples living in rural regions.
    Keywords: Marital stability, divorce, administrative divorce, divorce costs
    JEL: J12 J18 K36
    Date: 2018–11
  3. By: Jesse Kalinowski (Quinnipiac University); Matthew B. Ross (New York University); Stephen L. Ross (University of Connecticut)
    Abstract: Veil of Darkness tests identify discrimination by exploiting seasonal variation in the timing of sunset to compare the rate that minorities are stopped by police at the same hour of the day in daylight versus darkness. Such tests operate under the presumption that race is more easily observed by police prior to traffic stops during daylight relative to darkness. This paper addresses concerns that seasonal variation in traffic patterns could bias Veil of Darkness tests. The conventional approach to addressing seasonality is to restrict the sample to a window around Daylight Savings Time (DST) changes when the time of sunset is abruptly changed by one hour twice a year. However, this restriction reduces the variation in the timing of sunset potentially exacerbating measurement error in daylight and may still fail to address seasonality. The latter point is due to the fact that a substantial fraction of the seasonal change in daylight hours occur in the fall and spring (near DST) because of the elliptical nature of earth’s orbit. Therefore, we consider an alternative to simply restricting the sample to fall and spring where we instead apply an instrumental variables and fuzzy regression discontinuity approach. Our approach allows us to isolate the treatment effect associated with one hour of additional daylight on the share of police stops that are of African-American motorists. We find larger racial differences in Texas highway patrol stops using the regression discontinuity approach as compared to the annual sample, even though traditional approaches using the DST sample yield smaller estimates than the annual sample. The larger estimates are robust to the fall DST change sample, addressing concerns that motorists are tired and more accident prone immediately after the spring DST change.
    Keywords: Police, Traffic Stops, Seasonality, Measurement Error, Veil of Darkness, Racial Profiling, Racial Discrimination, Regression Discontinuity, Instrumental Variables
    JEL: K14 K42 J15 H11
    Date: 2019–07
  4. By: Watal, Jayashree; Dai, Rong
    Abstract: This WTO working paper studies availability and affordability of new and innovative pharmaceuticals in a post-TRIPS era. The WTO's TRIPS Agreement (TRIPS) makes it obligatory for WTO members − except least-developed country members (LDCs) - to provide pharmaceutical product patents with a 20-year protection term. Developing country members, other than LDCs, were meant to be compliant with this provision of TRIPS by 2005. This study investigates two questions in this context: (1) How does the introduction of product patents in pharmaceuticals affect the likelihood of pharmaceutical firms to launch new and innovative medicines in those markets? (2) For launched new and innovative medicines, how much do patent owners or generic pharmaceutical firms adjust their prices to local income levels? Using launch data from 1980 to 2017 covering 70 markets, the study finds that introduction of product patent for pharmaceuticals in the patent law has a positive effect on launch likelihood, especially for innovative pharmaceuticals. However, this effect is quite limited in low-income markets. Also, innovative pharmaceuticals are launched sooner than non-innovative ones, irrespective of the patent regime in the local market. Using a panel data set of originator and generic prices from 2007 to 2017, the study finds evidence of differential pricing for both originator and generic products. Overall, originators differentiate by about 11% and generics by about 26%. Differential pricing is larger for pharmaceuticals to treat infectious diseases, particularly for HIV/AIDs medicines, than for non-communicable diseases. However, pharmaceutical prices are far from being fully adjusted to local income levels in either case. However, competition, especially that within a particular medicine market, can effectively drive down prices in both originator and generic markets.
    Keywords: intellectual property rights,patents,TRIPS,pharmaceuticals,pharmaceutical prices,differential pricing,developing countries
    JEL: O34 I11 I19 F19
    Date: 2019
  5. By: Rashid, Muhammad Mustafa
    Abstract: Building on the system of reason provided for by the Greek philosopher and specifically Aristotle, St. Thomas Aquinas built a comprehensive system and theory of natural law which has lasted through the ages. The theory was further developed in the Middle Ages and in the Enlightenment Ages by many a prominent philosopher and economist and has been recognized in the Modern Age. The natural law-theory and system has been repeatedly applied to the spheres of economic thought and has produced many lasting contributions such as private property rights and individual rights. In recent times with the collapses of the financial system and rapid globalization, there has been a renewed interest in the application of natural law theory to economics to counter a certain anthropology and distortion of values created by a modern economic system of self-preservation deriving its insights from the philosophies of Thomas Hobbes and Niccolo Machiavelli.
    Keywords: St. Thomas Aquinas, Natural Law and Economics, Scholasticism, Morality and Markets, Law and Economics
    JEL: B0 B1 K0 K4
    Date: 2019–05–19
  6. By: Voigt, Stefan
    Abstract: The rule of law, a fundamental value of the European Union (EU), has come under stress in a number of its member states. The EU's response to these stresses has been criticized as politicized, slow, and unassertive. This research note develops a proposal to improve the current procedure.
    Keywords: rule of law,Article 7 TEU procedures,infringement proceedings,expert committee
    Date: 2019
  7. By: Ludwig von Auer; Tu Anh Pham
    Abstract: The literature on cartel stability sidelines antitrust policy, whereas the literature on antitrust policy tends to neglect issues of cartel stability. This paper attempts to connect these two interrelated aspects in the context of an augmented quantity leadership model. The cartel is the Stackelberg quantity leader and the fringe firms are in Cournot competition with respect to the residual demand. The antitrust authority decides on its own investigative effort and on the size of the fine that cartel members have to pay when they are detected. For testifying cartel members a leniency program is implemented. Our framework takes into account that these antitrust policy instruments are not costless for society. Our model demonstrates that the optimal antitrust policy exploits the inherent instability of a cartel to reduce its size.
    Keywords: antitrust, stability, Cournot fringe, oligopoly, leniency
    JEL: L13 L41
    Date: 2019
  8. By: Berge, Erling (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: The paper discusses the link between commons as they might have been used in prehistoric Norway and the rules concerning the exploitation of the commons as found in the oldest known legislation for regions of Norway, Gulating Law and Frostating Law. One clear social dilemma has been identified: the setting of a common date for moving animals from the home fields up to the summer farms and home again in the fall. The problem was obvious and the solution not particularly difficult to institute. Many more problems were of course present, but they did not rise to the level of a social dilemma. All such problems were managed by the rules enacted by the bygdeting along with other problems of a community. In particular the process of inheritance, the problems of fencing, how to change borders between neighbours and between individually owned fields and the commons, were treated by extensive rules. The bygdeting managed such issues from prehistory until the 16th and 17th centuries when reforms initiated by the Danish-Norwegian kings started to take effect, making the rule-of-law more uniquely a task for the central authorities and of less concern for the local communities. Maybe the basic legacy of the long history of local rule was a strong belief in the court system, that it would secure the old saying: "By law the land shall be built, not with unlaw wasted".
    Keywords: Commons; prehistory; Norway; social dilemmas; legislation
    JEL: K11 P48 Q15 Q20 Z13
    Date: 2019–04–12
  9. By: Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the U.S. Using detailed Swedish employer-employee data over the period 1990 to 2013, we find young firms to be more prominent in the Swedish business sector than in the U.S. business sector. Young Swedish firms, aged five years or less, account for more than half of all firms during this period. We also observe an increase in Swedish entrepreneurial activity for start-ups. However, increasing job destruction rates for young firms has implied a declining employment share for younger firms from the mid-2000s. Moreover, most of the job creation by young firms occurs in the expanding service sector. We discuss different explanations for why Sweden appears not to have the same strong decline in entrepreneurial activity as the U.S. has had during the last two decades. We argue that one important explanation is economic reforms in Sweden in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: entrepreneurship; industrial structure and structural change; job dynamics; Matched employer-employee data
    JEL: J23 K23 L26 L51
    Date: 2019–04

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